'Game-changer' loan program coming to Cedar Rapids neighborhoods

Loan program encouraging home improvements expected to start next month

Bob Thomas installs new shingles Thursday on his Wellington Heights home in Cedar Rapids. Thomas’ wife, Kris Thomas, bought the house 40 years ago and they decided to re-roof the house themselves after getting a quote from a contractor. Wellington Heights is among the neighborhoods initially included in the upcoming Neighborhood Finance Corp. program that will offer partially-forgivable home improvement loans to homeowners and homebuyers in the specified lending areas. (Liz Martin/The Gazette)Homes built in the 1930s line 20th Street NE near Franklin Middle School. The neighborhood, pictured Thursday, is among those to be included in the upcoming Neighborhood Finance Corp. program that will offer partially-forgivable home improvement loans to homeowners and homebuyers in the specified lending areas. The program initially will target neighborhoods closest to the city core, then shift to support other areas. (Liz Martin/The Gazette)

CEDAR RAPIDS — A lending program designed to encourage house updates by homebuyers and homeowners in older, run down or moderate condition neighborhoods is expected to launch next month and eventually spread to most parts of the city.

The initiative, which is estimated to provide 70 first mortgages and 25 home improvement loans in the first year, is called Neighborhood Finance Corp.

“We got our first application already,” said Scott Overland, a Cedar Rapids City Council member and a program supporter. “I suspect we will make our first loan in August, so our next step is to begin a marketing campaign. The reaction has been extremely positive.”

The program is an extension of the Neighborhood Finance Corp. serving Des Moines and Polk County. It would have a local office based at the Collins Community Credit Union on Old Marion Road, and a local advisory board led by Tom Chalstrom, president and chief executive of First Federal Credit Union who worked with the program previously in Des Moines.

Seeing the success in Central Iowa, Cedar Rapids leaders, including former council member Pat Shey and businessman Kyle Skogman, had begun working to establish such an initiative more than a decade ago.

The 2008 flood derailed plans until 2015, when then-candidate Overland began advocating for the program on the campaign trail.

Since being elected that same year, Overland, a financial adviser for Cedar Rapids Bank and Trust, has been working with Skogman, City Manager Jeff Pomeranz and others to string the pieces together. The Des Moines organization learned of the plans and urged Cedar Rapids to join forces rather than start from scratch.

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“We have so many older neighborhoods, if we don’t take care of them, we are going to have problems,” Skogman said.

Some older neighborhoods in Cedar Rapids have seen deterioration, which invites bad landlords and tenants and crime, and in turn scares off young families. This in turn puts a dent in school enrollment.

The problems perpetuate each other — as Cedar Rapids has seen — and advocates hope to shift the tide.

Neighborhood Finance Corporation map

The first target area is neighborhoods surrounding the central business district, including Wellington Heights, Taylor, Oakhill Jackson, Cleveland, Time Check and Mound View. Every few years, the eligibility area will shift to support more parts of the city.

“It’s targeted so over the course of time we can maintain and rehabilitate aging housing stock around the city,” Chalstrom said.

Overland points to the area near Drake University as a prime example of a turn around.

The program is seen by backers as a win across the board.

Employers benefit because well-kept older homes serve as desirable, affordable housing for a workforce. It stabilizes the tax base. It could be a lift for school enrollment. It can help resale interest for older homes that need work. And, lenders win because neighborhoods in better condition create safer conditions for making loans.

Seeing the potential, businesses have signed on to cover startup costs, Skogman said. He helped target 40 businesses with an ask of $25,000 each, and said there is a near-perfect participation so far.

Overland said they’ve raised about $700,000 out of a targeted $1 million to support startup costs for the first three years of operations, and secured $7 million out of a targeted $8 million in commitments from nine lenders to establish the loan pool.

The program is expected to be self-sustaining. Each loan, which could come as a purchase, refinance or home improvement loan, would have a repayable portion and a forgivable portion worth $10,000. A commitment of $1 million a year over six years from the city of Cedar Rapids will cover the forgivable portion if the person remains in the home for five years and completes the improvement as planned.

Recipients would need to qualify with an acceptable credit rating as they would a traditional loan, Overland said. Such home repair loans aren’t typically backed by banks or credit unions, which is why the Neighborhood Finance Corp. is unique, he said. The loans are based on the anticipated value when improvements are finished, Overland said.

“This can be a game-changer for old neighborhoods,” he said. “My guess is it is going to be really popular really fast.”